By John Campbell

Beginning credit users rarely have access to a large line of credit. Many credit card companies typically offer anywhere from $500 - $2,500 credit lines for consumers without extensive credit histories.

If you’re just beginning to build a credit history, chances are your credit score will be low. Without an established payment history, creditors won’t be able to determine the likelihood of you paying off your debts in a reasonable manner. Because of this, your first lines of credit may be very small.

Let’s say, for example, you’re given only a $500 line of credit for starters. It may be tempting for you to max out the card very quickly. This isn’t a good idea. Even if you don’t have much credit you should use no more than 30 percent of your available credit. For $500, that’s $150. Using no more than 30 percent of your available credit and making all your minimum required credit card payments on time will be very beneficial to your credit score. As you build a respectable credit history your credit score will increase as a result.

Your creditors like to stay posted as to your credit standing. They will often check your credit to see how well you’re managing your various debts. Once your credit score reaches a certain threshold, many creditors will automatically increase your credit limit. Over time a credit card that originally had a $500 limit could experience credit limit increases that bring your total available credit well above $10,000. Don’t expect to gain such a high credit limit overnight, however. It may take up to 10 years to experience such gains, and then only if your credit history is excellent.

Your creditors having access to your credit reports isn’t always a good thing. Beware of credit card companies that sneak a “universal default clause” into your cardholder agreement. If you have no problems making payments on your debt you’ll have nothing to worry about. Miss any payment to any creditor, however, and a credit card company you do business with that employs universal default will use it against you. With universal default, a credit card company can use any late or missed payment to any creditor as justification for increasing your interest rate to the default maximum allowable rate by law. This can be as high as 30 percent.

Be aware, as your credit limit grows, so too will the amount of interest you pay if you begin to use your line of credit more often. Even if you have an excellent interest rate and don’t have to worry about universal default, it costs money to borrow money. And that’s exactly what you’re doing with a credit card. If you owe $5,000, for example, you could be spending hundreds of dollars a year in interest payments alone. If your interest rate wasn’t exactly the greatest to begin with, you could actually end up spending thousands of dollars in interest, depending on how high your debt has risen.

If you’ve managed your credit wisely and are rewarded with larger lines of credit, it’s even more important to continue managing your credit like a pro. Otherwise, the cost of your credit may rise out of control.

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John Campbell is the writer and editor of CashBuzz, A financial portal for the rest of us. Check out cashbuzz.com for the latest articles on money management and tips and tricks that can help improve your finances. This article may be reprinted on your Web site if the copyright, author information and active link are included.